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Zanganeh Reaffirms Domestic Role in New Energy Contracts

Oil Minister Bijan Namdar Zanganeh on Wednesday sought to reassure his critics and stakeholders in Iran's oil and gas industry that a raft of new contracts to develop the country's massive hydrocarbon deposits will largely benefit the domestic industry.

"In value terms, more than 70% of all contracts will be given to Iranians. So far 11 domestic companies have qualified for the new deals," Zanganeh was quoted as saying by IRNA.

Iran awarded the first contract under the IPC framework earlier this month to Persia Oil and Gas Industry Development Co., a subsidiary of Iranian holding Setad Ejraiye Farmane Emam, to develop three small and medium-sized oilfields.

The Oil Ministry also reached an understanding with Khatam-al-Anbiya Construction Headquarters, an affiliate of the Islamic Revolution's Guard Corps, based on which the latter is to submit a master plan within three months for developing the joint Azadegan oilfield near the border with Iraq.

Zanganeh underlined the new contracts as a "golden opportunity" for creating jobs and wealth and improving the technical and operational ability of domestic companies.

"We will use the potential of domestic companies as the main or secondary contractors … foreign firms that come to Iran should choose an Iranian firm as partner. This will help us strengthen domestic companies."

According to reports, Iranian firms will be assigned as the main contractors of some smaller-scale projects with an option to partner with a foreign company. Meanwhile, large oil and gas fields will be put out to tender for multinationals. The IPC stipulates that foreign firms should have an Iranian partner.

The government of President Hassan Rouhani has developed a new model of contracts for oil and gas projects, officially known as Iran Petroleum Contract, to bring back foreign investment and technology to Iran's oil and gas sector that was hit by years of financial constraints due to the international economic sanctions.

But after the first unveiling of IPC in Tehran nearly a year ago, political opponents and critics of President Hassan Rouhani and his government condemned the new contracts claiming that they are "more of a sell-off to the (western) oil majors" and not in line with national interests.

IPC was initially billed as a replacement of the unattractive buyback contracts which have been used as the primary model of contracts for most oil and gas projects in nearly two decades. However, the two models are now set to coexist alongside engineering, procurement and construction (EPC) contracts which are to be used for assigning smaller projects.